Dustman Manufacturing Corporation's most recent production budget indicates the following required production:
| January | February | March | April | |||||||
| Required production (units) | 4,000 | 6,000 | 5,500 | 5,000 | ||||||
Each unit of finished product requires 3 feet of raw materials. The company maintains raw materials inventory equal to 2,000 feet plus 10% of the next month's expected production needs. The raw material used in Dustman Manufacturing Corporation's product costs $4.50 per foot. What is the value of raw material that Dustman Manufacturing should plan on purchasing for the month of February?
Multiple Choice
Explanation
Direct Materials Budget
| February | ||
| Required production in units | 6,000 | |
| Raw materials required per unit | 3 | |
| Raw materials needed to meet the production | 18,000 | |
| Add desired ending raw materials inventory [2,000 feet + (5,500 units × 3 feet per unit × 10%)] | 3,650 | |
| Total raw materials needs | 21,650 | |
| Less beginning raw materials inventory [2,000 feet + (6,000 units × 3 feet per unit × 10%)] | 3,800 | |
| Raw materials to be purchased | 17,850 | |
| Cost of raw materials per unit | $ | 4.50 |
| Cost of raw materials to be purchased | $ | 80,325 |
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